ARTICLES
A new Rule 6A has been inserted giving financial limit of Rs 25,000/- for ‘articles rec’d from foreign source’. Remember earlier under FCRA 1976 this limit was upto Rs 1000/-, under the FCRA 2011 rules this limit was omitted. Now this has been corrected. But please note that the new limit of Rs 25,000/- is applicable only for those articles which are given to persons for personal use. I interpret this as articles given to individuals for personal use. Likely to cover persons who could be using Foreign Hospitality. If NGOs receive any articles in normal course, this limit would not be applicable.
TRANSFER OF FOREIGN CONTRIBUTION TO OTHER ENTITIES
Rule 24 has now been replaced with a new one as follows.
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“24. Procedure for transferring foreign contribution to any unregistered person.—(1) A person who has been granted a certificate of registration or prior permission under section 11 and intends to transfer part of the foreign contribution received by him to a person who has not been granted a certificate of registration or prior permission under the Act, may transfer such foreign contribution to an extent not exceeding ten per cent of the total value thereof and for this purpose, make an application to the Central Government in Form FC-10. (2) Every application made under sub-rule (1) shall be accompanied by a declaration to the effect that (a) the amount proposed to be transferred during the financial year is less than ten per cent of the total value of the foreign contribution received by him during the financial year; (b) the transferor shall not transfer any amount of foreign contribution until the Central Government approves such transfer. (3) A person who has been granted a certificate of registration or prior permission under section 11 shall not be required to seek the prior approval of the Central Government for transferring the foreign contribution received by him to another person who has been granted a certificate of registration or prior permission under the Act provided that the recipient has not been proceeded against under any of (4) Both the transferor and the recipient shall be responsible for ensuring proper utilisation of the foreign contribution so transferred and such transfer of foreign contribution shall be reflected in the returns in Form FC-6 to be submitted by both the transferor and the recipient.” |
Transfer of FC to Unregistered Entities
Earlier rule requiring DM’s approval by unregistered NGOs before funds could be transferred has been dropped. But an undertaking has to be given by the transferor agency that the total amount proposed to be trfd. to such unregistered agencies are less than 10% of total FC that the transferor agency has rec’d and that it will not transfer funds without receiving necessary approval from the FCRA Dept.
Transfer of FC to registered / prior permission agencies
Clarification issued by the Dept. that registered entities need not take prior permission from the dept. before transfer of funds to other registered / prior permitted entities (see letter on SRRF website
http://srr-foundation.org/workshop/16_June_11/Clarification_Rec’d.pdf ) has now been formalized by amending the necessary rules. However the burden of ensuring that the recipient organisation is not being proceeded against still remains with the transferor agency. Hence please ensure that you continue to take undertakings for the same.
An additional requirement under Rule 24(4) has been put in place, which states that both transferor and recipient would be responsible for ensuring that funds are properly utilized and are reported under Form FC-6 (i.e. annual return) both by transferor and recipient. There is some confusion if the unregistered entity is required to file annual return and exactly whose annual return (i.e. transferor or recipient) would include this as utilization of Foreign Contribution.
Source : Foreign Contribution (Regulation) Amendment Rules, 2012
Respected: Sir,
We have a charitable trust in the slum area called Dharavi. We do have FCRA certificate.
We registered in the year of 2007. But till now we did not get any donation for FCRA. Sir please help us in providing the grant for the FCRA.
Thanks.
My Query is:
If a NGO organise a workshop with the help of foreign organisation and the funds that comes through them in NGO’s bank (which has no FCRA) Will it be considered as a donation?
The foreign organisation has these funds as a grant from their country to conduct programmes in other countries.
Please reply.
Dear members,
Taking clue from the discussion underway, i am of the opinion:
1. Shifting of budget provisions under budget line items is not justified, not to speak of shifting between projects/ head of accounts. You are not allowed to pre-finance/ out of your pocket, unless you want to donate the funds to tide over the situation
2. The date of expenses incurred can not precede the receipt of funds- this is basic financial discipline
3. You have absolutely no choice but to defer the implementation till the receipt of funds in the FC account
4. The sincerity and commitment to the cause cannot be justified by not following the credible financial management procedures
5. In government, we have the suspense funds/ budgetary limits- but that also is exercised by keeping the system transparently informed.
Thanks and regards,
Yours Sincerely,
Avinash Zutshi,
Development Management Consultant,
Water and Environment- Rural/ Urban Infrastructure, Policy, Reforms & Institutional Development
Dear Avinash,
Greetings from Hyderabad!
I would further like to comment on the points raised by you:
Thanks and regards,
_____________________________________
B V Soma Sastry
Director – Finance and Admin
Centre for World Solidarity
12-13-438, Street No. 1, Tarnaka
Secunderabad 500 017
Andhra Pradesh
http://www.cwsy.org
Dear Friends,
Udayashankar
PROPOSED RESPONSE TO POOJA VERMA’S QUERY
Pooja Verma has raised a query :
If we don’t receive funds under FCRA, but all documents are prepared, can we do expenses from NON FCRA amount? After that can we set off this with the help of branch accounting?
Another related query has come from Nimitta Bhatt:
Where project is ongoing, funds are expected, but physical arrival in our bank account is delayed, can we book the previous expenditure against this money?
Where sanction for new project is done, project has started somehow, but the money actually comes late, can we book this expenditure against it?
In both the above cases, is it not possible to raise bills for this project funds? There is also a bit of complication sometimes that you may have started the project from some trust funds, not necessarily from FC. Then what happens?
We shall be happy to know from colleagues about what is the usual practice and what is the amended FCRA saying about such a thing.
Both the above queries raise similar issues relating to FCRA. Accordingly both the queries are being covered by this response.
Project Implementation is a process which happens as per the ground reality and not necessarily only when funds are provided by the donor. Often organisations have no option but resort to spending, on the understanding when the funds are received, these can be paid to the source from whom the funds were originally rec’d.
However when one looks at the FCRA Act, it states very clearly under S.17 that ‘no funds other than foreign contribution shall be rec’d or deposited in such account (meaning FCRA Account). Thus no local fund may be deposited in this account, in such a scenario what options does one have?
First Option: Try not to spend the money till you can avoid it, put as much pressure on the donor agency to transfer the funds at the earliest.
Second Option: If that is not feasible, then spend it out of other FCRA funds available.
Third Option: If no funds are available in FC account and money has to be spent, then expenditure may be undertaken out of local own funds. Show it as expenditure under Local accounts. Though this will create a complication that when FC funds are rec’d the amount cannot be transferred to local account, but will become surplus which will remain as FC reserve in the FC balance sheet. Or the project may undertake additional activity. However in no case funds are transferred to FCRA Account.
Fourth Option: NGO undertakes activity on a foreign funded project out of its local funds and subsequently transfers the amount as settlement of the loan. Since the loan amount will be from local sources, it cannot be deposited in the FCRA account. That means fund will be spent from the local books. However when the FC funds are received, the amount so spent earlier is transferred to local account from FC account as return of loan / advance taken. What accounting entries would need to be passed:
AT THE TIME OF INCURRING OF EXPENDITURE
In local books
Dr Recoverable from ‘FC Project …. (Name)’
Cr Local Bank
In FC Books
Dr Expenditure
Cr Liability payable to… (name of the agency from whom funds were rec’d)
AT THE TIME OF RECEIPT OF FC FUNDS
In local books
Dr Debit Bank
Cr Recoverable from ‘FC Project …. (Name)’
In FC Books
Dr Liability payable to… (name of the agency from whom funds were rec’d)
Cr FCRA Bank
It may be added that divergent views appear on the third option. Even within the Expert Panel views were not unanimous. A view exists that such an entry in FC books cannot be passed, since no foreign contribution has been utilized. The other view is that FCRA Act basically requires that no local funds be received or deposited in such account / accounts. The account or accounts that it refers to is the bank account/s (see first paragraph of S. 17). Hence no entry should be made in the books of accounts, which has an impact on the bank account, however this should not mean that NGO cannot make any entry in other accounts, i.e. rec’able or payable.
Therefore please in case you decide to exercise this option, it should be done based on professional view after considering individual specific circumstances.
Fifth Option: Lastly another option available is that no entry be made in FC books at the time of incurring of expenditure, this will ensure synchronization between Receipt & Payment and FC6. However from accounting principles, it may not be strictly correct. Further there will be a reconciliation issue between financial statements of FC and Local balance sheets.
It is further added that no expenditure prior to sanction should be charged to a project without approval of the donor.
Compliments to Shri Soma Sastry for his prompt and very useful contributions.
__________________________________
Socio Research & Reform Foundation
(A Non Government Organisation)
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008
e-mail: socio-research@sma.net.in; website: http://www.srr-foundation.org
dear Sir
It is mandatory that separate books are kept. This will facilitate that the UC is also given properly after matching with the books, also the return to be filed with the home ministry should have the receipts and payments accounts duly audited.
srinivasan
As per the New and old FCRA Law, Receiving money from any donor agency through only account and keep the book of accounts separately, If do not received money from Donor agency for the project approved you cannot spent the Indian Money.
For Example, If the project is approved from donor 1/1/2013 but you have recd the money 30/1/2013 from the donor agency ,but you can spend the money from 1.1.2013 if you have the money in your FC bank account . We are making the Receipts and payment account for the project from the date of approval from the donor agencies , not receiving the money from the donor agencies.
I have a further query:
Two conditions:
1. where project is ongoing, funds are expected, but physical arrival in our bank account is delayed,, can we book the previous expenditure against this money?
2. where sanction for new project is done, project has started somehow, but the money actually comes late, can we book this expenditure against it?
In both the above cases, is it not possible to raise bills for this project funds? there is also a bit of complication sometimes that you may have started the project from some trust funds, not necessarily from FC. Then what happens?
We shall be happy to know from colleagues about what is the usual practice and what is the amended FCRA saying about such a thing.
nimitta bhatt
A lay person’s understanding suggests:
1 In either of the two cases, much depends on the signed agreement, covering accounting,transparency and Audit aspects, with the Donor.
2 If the Donor is a Government body, foreign or Indian, there is no way one can book
the expenditure incurred before the date of the signed agreement.
3 Problems of the kind under discussion can be obviated, atleast in cases of ongoing projects, if only accrual basis of accounting (payables and receivables) is adopted for maximising Transparency.
Like to read specialists’ opinions/advice.
Uday
whom document should be applicable in fcra annual return attachment. plz send me my mail id.
which form is applicable for fcra annual return 2011-12.
I have a question regarding the FCRA rules. I am currently facing trouble where in I need to figure out a problem at hand. A recreational club in India has 50% Indian members and 50% foreign members. The foreign members are paying a subscription fee for the service which they are utilizing. Will this subscription fee be considered as foreign contribution or not.
Please answer ASAP very urgent
Thank you
Dear all
Please note that both the accounts are to be kept separately , and should not be mixed up. For example the expense of FCRA should not be paid from Non FCRA account, and there should not be any transfer of funds even in case of need from one account to another.
Regards
srinivasan
Dear S Srinivasan
If we don’t receive actual amount from FCRA but and all document prepare will receiving amount, in this case can we do expenses from NON FCRA amount after that can we set off this with the help of branch accounting??/
please suggest me
Dear friends,
The FCRA 2010 has the following provision:
19. Every person who has been granted a certificate or given prior approval under this Act shall maintain, in such form and manner as may be prescribed,—
(a) An account of any foreign contribution received by him; and
(b) A record as to the manner in which such contribution has been utilized by him.
Moreover, the FCRA rules notified in April 2011 has the following clause:
11. Maintenance of accounts – Every person who has been granted registration or prior permission under section 12 shall maintain a separate set of accounts and records, exclusively, for the foreign contribution received and utilised.
There is no ambiguity on the matter. FC accounts have to be separately maintained.
Sincerely,
Kt
(T.Kaithang)
Finance Director,
Emmanuel Hospital Association,
808/92, Nehru Place,
New Delhi. PIN 110019
Phone: 91-11-30884052
Dear Rajneesh
It is absolutely mandatory to maintain separate books of accounts for FCRA and non-FCRA transactions. I am sure, if you are maintaining computerized books of accounts, you could consolidate them and produce the consolidated annuals accounts. Not doing so, from the very beginning, could result in unwarranted pain and agony latter, as the process of rewriting the books to split these transactions is literally a hair splitting exercise. I am stating this out of my own experience of managing this process, in one of the previous organizations, where I was employed, where my predecessor blatantly ignored this requirement and was maintaining single books of accounts for the entity, as a whole, in Tally!
Best regards
Sriraman
Dear Rajneesh,
Greetings from CWS, Hyderabad!
1. Every organization needs to have seperate set of books for FC and non FC funds. At the time of audit also it is advisable to have a consolidated FC statements and consolidated non FC statements. These two will consolidte into consolidted statements for the organization as a whole.
2. You can have the accounts the way you are suggesting. If you are doing so much, then kindly put eforts to ensure that you have consolidated non FC statements as well.
Thanks and regards,
B V Soma Sastry
Dear SRRF members,
We have received a new query under FCRA, from Rajneesh Kulshreshtha
”Please confirm whether we require separate set of books for FCRA and Non FCRA transactions or we can workout utilization of FCRA amount from consolidated books of account?
Whether we can have one consolidated and another set of books for FCRA transaction?
Please guide”
Looking forward to your response.
With warm regards,
Tanvi
____________________________________
Socio Research & Reform Foundation
(A Non Government Organisation)
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008
Tele/Fax: +91-11-25821088, 25817157, 25722044
e-mail: socio-research@sma.net.in